Davis casts shadow over Sainsbury job

Shareholders in J Sainsbury are concerned that candidates for the chief executive's job are being deterred by the elevation of Sir Peter Davis to the chairmanship.

One leading shareholder pointed out that the group has been searching for more than six months yet appears no closer to finding a successor to Davis, who is due to step up to the top job in four months.

'That does not give much time for an orderly handover to the new chief executive,' said the shareholder.

Davis's contract as chairman will expire in July 2005, although he has indicated he would stay on after that if required. But one leading headhunter said that even the shorter period was putting off candidates.

'If they cannot make changes for 12 months, because the chief executive responsible for the strategy is still on board, then they risk being sacked in the next 12 months because they will not have done enough to turn the business round.'

Shareholders are already unhappy about Davis's elevation, which goes against the Higgs code on non-executive directors. The company says the decision was taken be cause the current chairman, Sir George Bull, will also retire in March, when Davis's contract as chief executive expires, and it was felt it would be destabilising to have new people in both roles at the same time.

But the City is increasingly unhappy about Sainsbury's performance under Davis. With less than six months of his four-year programme to go, sales are falling and the company is well short of meeting the targets he set. That was underlined in last week's trading statement from rival supermarket chain Safeway. Despite the fact that it has been distracted by a protracted bid battle, it still managed to grow its sales by 0.7 per cent, while Sainsbury's fell.

Sainsbury's is engaged in a last-ditch attempt to boost performance with a new range of homeware and clothing which it hopes will kick-start sales. The group is due to announce interim results on 19 November, but these are also expected to be poor because of the disruption from store refurbishments.

'The focus now is on Christmas,' said one investor. 'If it has a lousy Christmas, there will be enormous pressure for change.'